exv10w3



 










Exhibit 10.3





INVESTOR RIGHTS AGREEMENT


     
This INVESTOR RIGHTS AGREEMENT (this
“Agreement”) is dated as of June 30, 2004 among
Healthaxis Inc., a Pennsylvania corporation (the
“Company”) and the various person identified and
listed on the signature pages hereto (each referred to herein as
a “Holder” and collectively, the “Holders”).
Capitalized terms used but not defined herein have the meanings
ascribed to them in the Preferred Stock Modification Agreement,
dated May 12, 2004, between the Company and the Holders
(the “Preferred Stock Agreement”).



     
WHEREAS, the execution of this Agreement is a
condition to the Closing described in the Preferred Stock
Agreement;



     
NOW THEREFORE, in consideration of the promises
and mutual covenants and agreements hereinafter, the Company and
the Holders hereby agree as follows:




ARTICLE I.




GENERAL RESTRICTIONS ON TRANSFER



     
1.1     No Holder shall
directly or indirectly effect any sale, transfer, assignment,
gift, exchange, pledge, hypothecation, encumbrance or other
disposition of any shares of Preferred Stock, Warrants or
Underlying Shares (collectively, the “Transfer Restricted
Securities”), or any interest therein, whether voluntary or
involuntary and regardless of the nature or method thereof
(other than an exchange, reclassification or other conversion of
the Transfer Restricted Securities into cash, securities or
other property pursuant to a merger, consolidation or
recapitalization of the Company) (each, a “Transfer”),
prior to the first anniversary of the Closing Date, except in
accordance with this Agreement and applicable federal and state
securities laws and regulations.




ARTICLE II.




RESTRICTIONS ON PRIVATE SALE TRANSACTIONS



     
2.1     The Initial
Transfer Restriction Period. For a period of one hundred
twenty (120) days from the Closing Date (the
“Initial Transfer Restriction Period”), the
Holders will be subject to the following restrictions on any
Transfer of the Transfer Restricted Securities other than
through the public market as specified in Article III, as
follows:




		
	 	     
    a. Each Holder may Transfer the Transfer
    Restricted Securities in one or more transactions; provided
    that, the buyer in any such transaction (a “Private
    Buyer”) or in one or a series of transactions, does not
    directly or indirectly acquire, after giving effect to such
    transaction or series of transactions, in the aggregate, more
    than 1,000,000 shares of Common Stock or Warrants
    (collectively, “Common Equivalents”) from the
    Holders (note that upon a Transfer in compliance with the terms
    of this Agreement, the shares of Preferred Stock that are the
    subject of such a Transfer shall automatically convert into
    shares of Common Stock pursuant to the terms of the Amended and
    Restated Certificate); and provided further that such
    Private Buyer is not in any way affiliated (within the meaning
    of Rule 405 of the Securities Act of 1933, as amended) with
    any other Private Buyer, is not acting in concert with any other
    Private Buyer and is not a member of a “group” (within
    the meaning of Section 13(d)(3) of the Securities Exchange
    Act of 1934, as amended) that includes another Private Buyer as
    a member.
    
	 
	 	     
    b. Subject to compliance with applicable
    securities laws, there is no limit on the number of Private
    Buyers to whom any Holder may Transfer the Transfer Restricted
    Securities.
    
	 
	 	     
    c. No approval is required for Transfers
    consummated in compliance with Section 2.1(a) (subject to
    the Company’s receipt of a certification from the relevant
    Holder(s) that it has made a good faith
    




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    inquiry of the Private Buyer with respect to the
    matters covered in the second proviso of Section 2.1(a) and
    that it has no reason to believe that all of the terms of
    Section 2.1(a) have not been complied with). Each of the
    Holders agrees that, prior to any Transfer during the Initial
    Transfer Period, it shall request a written representation or
    certification from the relevant Private Buyer that such Private
    Buyer meets the requirements of the second proviso of
    Section 2.1(a); provided, however that in no event
    shall the failure of such Private Buyer to make such written
    representation or certification preclude the proposed Transfer
    or preclude the Holder from making the certification referenced
    in the parenthetical above; and provided further that in
    no event shall a Holder be required to make any independent
    investigation regarding compliance with the requirements of the
    second proviso of Section 2.1(a), other than the making of
    the inquiry of the Private Buyer referenced above and the
    request for a written representation or certification from the
    relevant Private Buyer.
    
	 
	 	     
    d. Any proposed sale transaction covered by
    this Section 2.1 involving the Transfer Restricted
    Securities during the Initial Transfer Restriction Period that
    does not satisfy the terms and conditions of Section 2.1(a)
    or Article III, is subject to the approval of the
    Company’s Board of Directors (the “Board”), in
    its sole discretion.
    




     
2.2     Second
Transfer Restriction Period. From the expiration of the
Initial Transfer Restriction Period until the first anniversary
of the Closing Date (the “Second Transfer Restriction
Period”), the Holders will be subject to the following
restrictions on any Transfer of the Transfer Restricted
Securities other than through the public market as specified in
Article III, as follows:




		
	 	     
    a. Subject to Section 2.2(b) below,
    each Holder may Transfer its Transfer Restricted Securities to
    Private Buyers in one or more transactions without restriction
    of any kind; provided that any individual Private Buyer
    is not in any way “affiliated” with any other Private
    Buyer, is not acting in concert with any other Private Buyer and
    is not a member of a “group”(within the meaning of
    Section 13(d)(3) of the Exchange Act) that includes another
    Private Buyer as a member (and subject to the Company’s
    receipt of a certification from the relevant Holder(s) that it
    has made a good faith inquiry of the Private Buyer with respect
    to the matters covered in this proviso and that it has no reason
    to believe that all of the terms of this proviso have not been
    complied with). Each of the Holders agrees that, prior to any
    Transfer during the Second Transfer Period, it shall request a
    written representation or certification from the relevant
    Private Buyer that such Private Buyer meets the requirements of
    the proviso contained in the first sentence of this
    Section 2.2(a); provided, however that in no event
    shall the failure of such Private Buyer to make such written
    representation or certification preclude the proposed Transfer
    or preclude the Holder from making the certification referenced
    in the proviso contained in the first sentence of this
    Section 2.2(a); and provided further that in no
    event shall a Holder be required to make any independent
    investigation regarding compliance with the requirements of the
    proviso contained in the first sentence of this
    Section 2.2(a), other than the making of the inquiry of the
    Private Buyer and the request for a written representation or
    certification from the relevant Private Buyer as set forth in
    this Section 2.2(a).
    
	 
	 	     
    b. Right of First Refusal.
    
	 
	 	     
    (i) In the event of any proposed private
    sale transaction by a Holder upon consummation of which any
    single Private Buyer shall have directly or indirectly acquired
    Common Equivalents from the Holders in an aggregate amount
    exceeding 1,000,000, such Holder must first give notice to the
    Company (the “Transfer Notice”) which shall
    include (i) the name and address of the proposed Private
    Buyer, (ii) the number of Transfer Restricted Securities
    proposed to be Transferred (the “Offered
    Securities”), (iii) the proposed purchase price
    thereof (the “Purchase Price”), including the
    type of consideration, and (iv) all other material terms
    and conditions of such offer, including the date upon which the
    Holder and the proposed Private Buyer reasonably expect to
    complete the Transfer (the “Proposed Sale
    Date”).
    
	 
	 	     
    (ii) Upon written notice (a “Company
    Notice”) to the relevant Holder within fifteen
    (15) Business Days (as defined below) of the Company’s
    receipt of a Transfer Notice, the Company or its designee shall
    have the right to purchase all (but not less than all) of the
    Offered Securities on the same terms and conditions set forth in
    the Transfer Notice and at the price set forth in the Transfer
    Notice. The Company Notice shall constitute an irrevocable
    commitment to purchase from the Holder the Offered Securities on
    




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    such terms and conditions. The purchase of the
    Offered Securities described in this Section 2.2(c) must be
    consummated by the Company or its designee before the later of
    (1) fifteen (15) Business Days following receipt of the
    Transfer Notice by the Company and (2) the Proposed Sale
    Date; provided that in the event (and only in the event)
    that a non-cash payment is being made for the Offered
    Securities, and the value of the purchase price has not yet been
    established, the closing of the purchase of the Offered
    Securities under this Section 2.2(c) shall occur
    immediately following determination of such purchase price,
    which determination shall be made as set forth in
    Section 2.2(d). If the Company (or its designee) exercises
    its rights pursuant to this Section 2.2(c), then any cash
    payment for the Offered Securities shall be effected by check or
    wire transfer against delivery of the Offered Securities to be
    purchased at the time of the closing of the purchase.
    
	 
	 	     
    (iii) For purposes of this Agreement,
    “Business Day” means any day except Saturday, Sunday
    and any day which shall be a legal holiday or a day on which
    banking institutions in the State of New York generally are
    authorized or required by law or other government actions to
    close.
    
	 
	 	     
    c. Valuation of Property. If the
    Purchase Price specified in the Transfer Notice is wholly or
    partially payable through delivery of a promissory note, then
    the Company or its designee may effect payment in the same
    fashion. If the Purchase Price specified in the Transfer Notice
    is payable in property other than cash or indebtedness, the
    Company or its designee shall have the right to pay the Purchase
    Price in the form of cash equal in amount to the value of such
    property. If the transferring Holder and the Company (or its
    designee) cannot agree on such cash value within fifteen
    (15) Business Days after the Company’s receipt of the
    Transfer Notice, the valuation shall be made by an appraiser of
    recognized standing selected by the transferring Holder and the
    Company or, if they cannot agree on such an appraiser within ten
    (10) calendar days thereafter, each shall select an appraiser of
    recognized standing, and the two appraisers shall promptly
    designate a third appraiser of recognized standing, whose
    appraisal shall be determinative of such value. The cost of such
    appraisal shall be shared equally by the transferring Holder and
    the Company (or its designee). If the time for the closing of
    the Company’s (or its designee’s) purchase has expired
    but for the determination of the value of the Purchase Price
    offered by the prospective transferee(s), then such closing
    shall be held on or prior to the fifth business day after such
    valuation shall have been made pursuant to this subsection.
    
	 
	 	     
    d. Transferring Holder’s Right to
    Sell if Option Not Exercised. If the rights granted to the
    Company pursuant to this Section 2.2 are waived, or the
    Company (or its designee) fails to exercise such rights, then
    the transferring Holder shall have the right to effect the
    Transfer until the later of (1) sixty (60) days from
    the date of delivery of the Transfer Notice or (2) the
    Proposed Sale Date, all of the Offered Securities to the Private
    Buyer specified in the Transfer Notice at a price no less than
    the Purchase Price and on terms no more favorable to the Private
    Buyer than specified in the Transfer Notice.
    




     
2.3     Free
Transferability. Subject to Sections 2.4 and 2.5 below,
but notwithstanding anything otherwise to the contrary in this
Agreement, from and after the first anniversary of the Closing
Date, there shall be no restrictions of any kind with respect to
Transfers of Transfer Restricted Securities by any of the
Holders, other than any restrictions imposed by applicable state
or federal securities laws.



     
2.4     Transfer
Restrictions Generally.



     
a. If any Holder should decide to Transfer
the Transfer Restricted Securities held by it, such Holder
understands and agrees that it generally may do so only pursuant
to an effective registration statement under the Securities Act
of 1933, as amended (“Securities Act”), to the Company
or pursuant to an available exemption from the registration
requirements of the Securities Act or Rule 144 promulgated
under the Securities Act (“Rule 144”) or
any other available exemption from the Securities Act. In
connection with any Transfer of any Transfer Restricted
Securities other than pursuant to an effective registration
statement or to the Company, the Company may require the
transferor thereof to provide to the Company a written opinion
of counsel experienced in the area of United States securities
laws selected by the Transferor, the form and substance of which
opinion shall be customary for opinions of counsel in comparable
transactions and reasonably acceptable to the Company, to the
effect that such Transfer does not require registration of such



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transferred securities under the Securities Act;
provided, however, that if the Transfer Restricted
Securities may be sold pursuant to Rule 144(k), no written
opinion of counsel shall be required from the Holder if such
Holder provides reasonable assurances that such security can be
sold pursuant to Rule 144(k). Subject to compliance with
the other terms of this Agreement, if a Holder provides the
Company with an opinion of counsel, the form and substance of
which opinion shall be customary for opinions of counsel in
comparable transactions and reasonably acceptable to the
Company, to the effect that the Transfer of the Transfer
Restricted Securities may be made without registration under the
Securities Act, or the Holder provides the Company with
reasonable assurances that the Transfer Restricted Securities
can be sold pursuant to Rule 144, the Company shall permit
the Transfer, and, in the case of Common Stock, promptly
instruct its transfer agent to issue one or more certificates in
such name and in such denominations as specified by such Holder
and without any restrictive legend. Notwithstanding the
foregoing or anything else contained herein to the contrary, the
Transfer Restricted Securities may be pledged as collateral in
connection with a bona fide margin account or other lending
arrangement.




     
b. Each Holder agrees to the imprinting, so
long as is required by this Section 2.4(b), of the
following legend, or a similar legend to the same effect, on the
Transfer Restricted Securities:



     
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY
STATE. ACCORDINGLY, THE SHARES MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AS DETERMINED PURSUANT TO AN OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE CORPORATION THAT THE
PROPOSED TRANSACTION WILL BE EXEMPT FROM REGISTRATION.



     
The Transfer Restricted Securities shall not
contain the legend set forth above (i) if in the written
opinion of counsel to the Company experienced in the area of
United States securities laws such legend is not required under
applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff
of the Commission) or (ii) if such Transfer Restricted
Securities may be sold pursuant to Rule 144(k). The Company
agrees that it will provide each Holder, upon request, with a
certificate or certificates representing shares of Preferred
Stock or Common Stock, free from such legend at such time as
such legend is no longer required hereunder. If such certificate
or certificates had previously been issued with such a legend or
any other legend, the Company shall, at its own expense, upon
request and upon the delivery of the legended certificate(s),
reissue such certificate or certificates free of any legend.



     
2.5     Transfers to
Affiliates. A Holder may Transfer the Transfer Restricted
Securities to an affiliate (as such term is defined in
Rule 405 promulgated under the Securities Act, an
“Affiliate”) at any time, provided, that
such Affiliate shall execute an addendum to this Agreement and
shall be bound by all of the terms of this Agreement to the same
extent as the transferring Holder.




ARTICLE III.




RESTRICTIONS ON PUBLIC SALE TRANSACTIONS



     
3.1     Sales of
Transfer Restricted Securities in the public market:



     
a. may only be made in compliance with the
“brokers’ transactions” requirements of
Rule 144 promulgated under the Securities Act;



     
b. may only be made to persons that, to the
transferring Holder’s best knowledge, are not “Private
Buyers;” and



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c. if the sales price is less than
$3.50 per share of Common Stock, are limited to the
following number of shares of Common Stock per Holder per
calendar month:




	 	 	 	 	 
	Holder		Number of Shares
	
		

	
    
    Brown Simpson Partners I, Ltd. 

    	 	 	38,500	 
	
    
    LB I Group Inc. 

    	 	 	29,750	 
	
    
    The Pennsylvania State University
    

    	 	 	4,375	 
	
    
    OTAPE LLC
    

    	 	 	4,375	 





ARTICLE IV.




VOTING RIGHTS



     
4.1     The Preferred
Stock has no voting rights, except as required by applicable law.



     
4.2     To the extent
that applicable law grants the Preferred Stock voting rights in
the context of a merger or consolidation (a “Merger”),
then the Holders agree to vote their shares of Preferred Stock
in favor of the Merger if all of the following conditions are
met:




		
	 	     
    a. Prior to the first anniversary of the
    Closing Date: (i) if the Company’s common shareholders
    have approved the Merger in accordance with applicable law; and
    (ii) the per share price to be received by the Holders in
    the Merger for each share of Preferred Stock is at least $3.50
    in cash.
    
	 
	 	     
    b. On or after the first anniversary of the
    Closing Date: (i) if the Company’s common shareholders
    have approved the Merger in accordance with applicable law; and
    (ii) if the per share price to be received by the Holders
    in the Merger for each share of Preferred Stock is at least
    equal to the value (and payable in the same form of
    consideration) they would have received in the Merger if they
    had they converted their shares of Preferred Stock into shares
    of Common Stock immediately prior to the Merger.
    





ARTICLE V.




RESTRICTIONS ON ADDITIONAL FINANCINGS



     
5.1     Restrictions
on Issuance of Equity. Until the first anniversary of the
Closing Date, the Company hereby agrees that it will not issue
any shares of capital stock (or any options, warrants or other
rights to purchase shares of its capital stock) in a transaction
implying a pre-money valuation of less than
$14,500,000 million or at a per share price of less than
$2.15; provided, however, that this restriction shall not
apply to the granting of stock options to the Company’s
employees or directors pursuant to stock option plans in
existence on the date of this Agreement, with an exercise price
at least equal to the fair market value of the Common Stock on
the date of grant.



     
5.2     Holders’
Right of First Refusal. Until the first anniversary of the
Closing Date, the Holders shall have a right of first refusal
(i) to match the terms upon which any third party proposes
to purchase from the Company any equity securities of the
Company having an aggregate purchase price of at least
$1,000,000, on an all or none basis, and (ii) to match the
terms on which the Company proposes an offering of its Common
Stock. If the Company desires to engage in a transaction
described in (i) or (ii) above, the Company must first
give written notice to the Holders (the “Financing
Notice”) which shall include (i) the number and
terms of the shares of equity securities proposed to be offered
(the “Offered Equity Securities”),
(ii) the proposed purchase price thereof (the
“Equity Purchase Price”), including the type of
consideration and (iii) all other material terms and
conditions of such offer.



     
a. The Holders’ Option. Each
Holder shall have ten (10) Business Days from the
Holder’s receipt of the Financing Notice to elect to
purchase such Holder’s pro rata share of the Offered Equity
Securities at the same price and subject to the same terms and
conditions as described in the Financing Notice. Each Holder may
exercise such right, and thereby purchase all of its pro rata
share (with any reallotments as provided below) of the Offered
Equity Securities, by notifying the Company in writing, before
the expiration of the 10



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business-day period (a “Holder
Notice”). The delivery to the Company of a Holder Notice
shall constitute an irrevocable commitment to purchase from the
Company the Offered Equity Securities. Each Holder’s pro
rata share of the Offered Equity Securities shall be the result
obtained by multiplying such Offered Equity Securities by a
fraction, the numerator of which shall be the number of shares
of Preferred Stock owned by such Holder on the date of the
Financing Notice, and the denominator of which shall be the
total number of shares of Preferred Stock held by all Holders on
the date of the Financing Notice. To the extent the Offered
Equity Securities consist of shares of more than one class or
series, each Holder’s pro rata share (of Offered Equity
Securities or of realloted shares, as provided below) shall be
calculated as to each series of Offered Equity Securities
included therein and the rights granted in this Section 5.2
shall apply to each such class or series. Each Holder shall have
a right of reallotment such that, if a Holder fails to exercise
the right to purchase its pro rata share of the Offered Equity
Securities, the Company shall deliver a further notice to the
participating Holders (a “Second Financing
Notice”), who then shall have an additional right for
two business days from the participating Holders’ receipt
of the Second Financing Notice, to elect to purchase such
non-participating Holder’s pro rata share of the Offered
Equity Securities by so notifying the Company in writing
pursuant to a Holder Notice, before the expiration of the two
business-day period. Each participating Holder’s pro rata
share of the Offered Equity Securities with respect to the
reallotment shall be the result obtained by multiplying the
Offered Equity Securities not previously committed to be
purchased by a fraction, the numerator of which shall be the
number of shares of Preferred Stock owned by such participating
Holder on the date of the Second Financing Notice, and the
denominator of which shall be the total number of shares of
Preferred Stock held on the date of the Second Financing Notice
by all Holders participating in such over-allotment. If the
Holders deliver Holder Notices to the Company indicating that
they will buy all of the Offered Equity Securities, then payment
for the Offered Equity Securities shall be by check or wire
transfer, against delivery of the Offered Equity Securities to
be purchased at the time of the scheduled closing therefor,
which shall be no later than 10 (12, if the shares offered in a
Second Financing Notice are fully subscribed) business days
after the Holders’ receipt of the Financing Notice, unless
the Financing Notice contemplates a later closing (in which case
it will be such date), or unless the value of the purchase price
has not yet been established pursuant to Section 5.2(b) (in
which event, the closing shall occur immediately following the
determination of such purchase price).




     
b. Valuation of Property. Should the
Equity Purchase Price specified in the Financing Notice be
payable in property other than cash, the Holders shall have the
right to pay the Equity Purchase Price in the form of cash equal
in amount to the value of such property. If the participating
Holders and the Company cannot agree on such cash value within
10 business days after the Holder’s receipt of the
Financing Notice, the valuation shall be made by an appraiser of
recognized standing selected by the participating Holders and
the Company or, if they cannot agree on such an appraiser within
10 calendar days thereafter, each shall select an appraiser of
recognized standing, and the two appraisers shall promptly
designate a third appraiser of recognized standing, whose
appraisal shall be determinative of such value. The cost of such
appraisal shall be shared equally by the participating Holders
and the Company. If the time for the closing of the
participating Holders’ purchase has expired but for the
determination of the value of the Equity Purchase Price set
forth in the Financing Notice, then such closing shall be held
on or prior to the fifth business day after such valuation shall
have been made pursuant to this subsection.



     
5.3     The
Company’s Right to Sell if Option Not Exercised. If the
rights granted to the Holders pursuant to Section 5.1 are
waived or are not exercised as to all of the Offered Equity
Securities, then the Company shall have the right to offer for
60 days from the delivery of the Financing Notice, all of
the Offered Equity Securities specified in the Financing Notice
at a price no less than the Equity Securities Price and on terms
no more favorable to the offerees than specified in the
Financing Notice.




ARTICLE VI.




OTHER AGREEMENTS



     
6.1     Takeover
Defenses. Until the earlier of (i) the fourth (4th)
anniversary of the Closing Date and (ii) the second (2nd)
anniversary of such date upon which the Holders hold less than
500,000 shares of



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Preferred Stock, neither the Company nor any of
its subsidiaries shall enter into stockholder rights plan or
“poison pill” or any similar arrangement giving any
Person the right to purchase any equity interest in the Company
upon the occurrence of certain events. For purposes of
clarification, the Company’s current Articles of
Incorporation and Bylaws, as such exist on the date hereof, and
applicable law are not deemed to constitute a “poison
pill” or similar arrangement (provided, that the
Company agrees that it will not “opt-in” to the
application of any new laws that may be deemed to constitute a
“poison pill” or similar arrangement).




     
6.2     Employment
Agreements. Notwithstanding Section 6.1 of this
Agreement, the Company is permitted to enter into new employment
agreements with its employees that are substantially similar to
the Company’s existing “Change in Control Employment
Agreements” with Messrs. McLane, Carradine, Webb,
Ramsburg, Taylor and Garinger (the “Existing COC
Agreements”), which agreements become effective upon a
“Change in Control” (as defined in the Existing COC
Agreements); provided that:




		
	 	     
    (i) such agreements may only be entered into
    with employees appointed to the Company’s Executive
    Management Committee, which consists of senior management of the
    Company;
    
	 
	 	     
    (ii) such agreements provide that the
    “Employment Period” (as defined in the Existing COC
    Agreements under Section 2 thereof) shall be up to a
    maximum of two (2) years;
    
	 
	 	     
    (iii) no such agreements provide for
    severance payments in excess of an amount equal to twelve
    (12) months of salary and bonus; and
    
	 
	 	     
    (iv) such agreements, together with all of
    the Existing COC Agreements that are then in effect, contain
    provisions providing for severance payments after a Change in
    Control that collectively do not exceed an aggregate amount of
    One Million Nine Hundred Fifty Thousand Dollars ($1,950,000).
    




     
For purposes of clarity, the relevant severance
payment amount affected by clauses (iii) and (iv) of
this Section 6.2 is currently provided for in
Section 5(a)(i)(B) of the Existing COC Agreements.



     
The terms of this Section 6.2 shall
terminate simultaneously with those of Section 6.1.



     
6.3     Issuance of
Shares of Series A Convertible Preferred Stock. The
Company acknowledges and agrees with the Holders that for so
long as the Holders beneficially own at least
100,000 shares of Preferred Stock, the Company will not
issue any additional shares of Preferred Stock (designated as
the Series A Convertible Preferred Stock).




ARTICLE VII.




GENERAL PROVISIONS



     
7.1     Entire
Agreement. This Agreement, together with the other
Transaction Documents, contains the entire understanding of the
parties with respect to the subject matter hereof and supersedes
all prior agreements and understandings, oral or written, with
respect to such matters, including without limitation those
certain letters of intent dated April 8, 2004 (and related
term sheets) between the Company and each of Brown Simpson
Partners I , Ltd. and LB I Group Inc.



     
7.2     Notices.
Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must
be in writing and will be deemed to have been delivered
(i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile, provided confirmation of
transmission is mechanically or electronically generated and
kept on file by the sending party (if received by 5:00 p.m.
eastern time (“ET”) where such notice is received) or
the first business day following such delivery (if received
after 5:00 p.m. ET where such notice is received); or
(iii) one business day after deposit with a



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nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such
communications shall be:




     
If to the Company:




		
	 	
    Healthaxis Inc.
    
	 	
    The Towers at Williams Square
    
	 	
    5215 N. O’Connor Blvd.,
    Suite 800
    
	 	
    Irving, Texas 75039
    
	 	
    Telephone: (972) 443-5000
    
	 	
    Facsimile: (972) 556-0572
    
	 	
    Attention: Chief Financial Officer
    




     
With a copy to:




		
	 	
    Locke Liddell & Sapp LLP
    
	 	
    2200 Ross Avenue, Suite 2200
    
	 	
    Dallas, Texas 75201-6776
    
	 	
    Telephone: (214) 740-8000
    
	 	
    Facsimile: (214) 740-8800
    
	 	
    Attention: John B. McKnight
    




     
If to the Transfer Agent:




		
	 	
    Mellon Investor Services LLC
    
	 	
    44 Wall Street, 6th Floor
    
	 	
    New York, New York 10005
    
	 	
    Telephone: (917) 320-6254
    
	 	
    Facsimile: (917) 320-6318
    
	 	
    Attention: Client Service Manager
    




     
If to Brown Simpson Partners I, Ltd. to:




		
	 	
    152 West 57th Street, 21st Floor
    
	 	
    New York, New York 10019
    
	 	
    Telephone: (212) 247-8200
    
	 	
    Facsimile: (212) 247-1329
    
	 	
    Attention: Mitchell D. Kaye
    




     
If to OTAPE LLC to:




		
	 	
    c/o OTA Limited Partnership
    
	 	
    1 Manhattanville Road
    
	 	
    Purchase, NY 10577
    
	 	
    Telephone: (914) 460-4013
    
	 	
    Facsimile: (914) 694-5831
    
	 	
    Attention: Vinny Digeso
    




     
If to LB I Group Inc. to:




		
	 	
    c/o Lehman Brothers, Inc.
    
	 	
    745 Seventh Avenue, 2nd Floor
    
	 	
    New York, New York 10019
    
	 	
    Telephone: (212) 526-2614
    
	 	
    Facsimile: (212) 526-2198
    
	 	
    Attention: Michael Blaustein
    




8








 



     
If to The Pennsylvania State University to:




		
	 	
    The Pennsylvania State University
    
	 	
    103 Innovation Boulevard, Suite 212
    
	 	
    University Park, PA 16802
    
	 	
    Telephone: (814) 863-9150
    
	 	
    Facsimile: (814) 863-9160
    
	 	
    Attention: David E. Branigan
    




     
With a copy, in the case of Notice to Brown
Simpson Partners I, Ltd. to:




		
	 	
    Lowenstein Sandler PC
    
	 	
    65 Livingston Avenue
    
	 	
    Roseland, New Jersey 07068
    
	 	
    Telephone: (973) 597-2500
    
	 	
    Facsimile: (973) 597-2400
    
	 	
    Attention: Steven E. Siesser
    





Each party shall provide written notice to the
other party of any change in address or facsimile number in
accordance with the provisions hereof.



     
7.3     Amendments;
Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Holders of not less than
sixty percent (60%) of the then outstanding shares of Preferred
Stock or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either
party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter.
Notwithstanding the foregoing, no such amendment shall be
effective to the extent that it applies to less than all of the
holders of the shares of Preferred Stock outstanding. The
Company shall not offer or pay any consideration to a Holder for
consenting to such an amendment or waiver unless the same
consideration is offered to each Holder and the same
consideration is paid to each Holder that consents to such
amendment or waiver.



     
7.4     Headings.
The headings herein are for convenience only, do not constitute
a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.



     
7.5     References.
References herein to Sections are to Sections of this Agreement,
unless otherwise expressly provided.



     
7.6     Successors
and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted
assigns. Neither the Company nor any of the Holders may assign
this Agreement or any rights or obligations hereunder without
the prior written consent of each of the parties hereto.



     
7.7     No
Third-Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted
successors and assigns and is not for the benefit of, nor may
any provision hereof be enforced by, any other Person.



     
7.8     Governing
Law. The corporate laws of the Commonwealth of Pennsylvania
shall govern all issues concerning the relative rights of the
Company and the Holders as its shareholders. All questions
concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and
construed in accordance with the internal laws of the State of
New York without regard to the principles of conflicts of law
thereof. Each party hereby irrevocably submits to the
nonexclusive jurisdiction of the state and federal courts
sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein,
and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit,
action or proceeding is improper. Each



9








 




party hereby irrevocably waives personal service
of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement
and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES
NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.




     
7.9     Counterparts.
This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party, it
being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and
effect as if such facsimile signature page were an original
thereof.



     
7.10     Severability.
In case any one or more of the provisions of this Agreement
shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affected or impaired thereby
and the parties will attempt to agree upon a valid and
enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.



     
7.11     Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each
party hereto will be entitled to specific performance of the
obligations hereunder without the showing of economic loss and
without any bond or other security being required. Each of the
Company and the Holders (severally and not jointly) agree that
monetary damages would not be adequate compensation for any loss
incurred by reason of any breach of its obligations described in
the foregoing sentence and hereby agree to waive in any action
for specific performance of any such obligation the defense that
a remedy at law would be adequate.



     
7.12     Independent
Nature of Holders’ Obligations and Rights. The
obligations of each Holder hereunder are several and not joint
with the obligations of the other Holders hereunder, and no
Holder shall be responsible in any way for the performance of
the obligations of any other Holder hereunder. Nothing contained
herein or in any other agreement or document delivered at any
closing, and no action taken by any Holder pursuant hereto or
thereto, shall be deemed to constitute the Holder as a
partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Holders are in any
way acting in concert with respect to such obligations or the
transactions contemplated by this Agreement. Each Holder shall
be entitled to protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of
the Transaction Documents, and it shall not be necessary for any
other Holder to be joined as an additional party in any
proceeding for such purpose.



     
7.13     Payment Set
Aside. To the extent that the Company makes a payment or
payments to the Holders hereunder or pursuant to the Transaction
Documents or the Holders enforce or exercise their rights
hereunder or thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to the Company, a
trustee, receiver or any other Person under any law (including,
without limitation, any bankruptcy law, state or federal law,
common law or equitable cause of action), then to the extent of
any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full
force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.



     
7.14     Further
Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the
transactions contemplated hereby.



10








 



     
7.15     Automatic
Adjustments. In the event that the number of shares of
Common Stock issuable upon the conversion of the Preferred Stock
is changed into a different number of shares of any class or
classes of stock, whether by subdivision, split,
recapitalization, reclassification, exchange, substitution of
otherwise, all references herein to numbers of shares of Common
Stock (or Common Equivalents) and per share prices of stock
shall be appropriately adjusted.



     
[Remainder of Page Intentionally Left
Blank]


11








 



     
IN WITNESS WHEREOF, the parties hereto have
caused this Investors Rights Agreement to be duly executed by
their respective authorized persons as of the date first
indicated above.




		
	 	
    HEALTHAXIS INC.
    






			
	 	By: 	
    /s/ JAMES W. MCLANE
    




		
	 	
    

	 	
    Name:        James
    W. McLane
    



			
	 	Title:	
    Chief Executive Officer
    





		
	 	
    BROWN SIMPSON PARTNERS I, LTD.
    






			
	 	By: 	
    /s/ MITCHELL D. KAYE
    




		
	 	
    

	 	
    Name: Mitchell D. Kaye
    




			
	 	Title:	
    Chief Investment Officer
    






		
	 	
    OTAPE LLC
    






			
	 	By: 	
    /s/ RICHARD M. COYNE
    




		
	 	
    

	 	
    Name: Richard M. Coyne
    




			
	 	Title:	
    General Counsel
    






		
	 	
    LB I GROUP INC.
    






			
	 	By: 	
    /s/ MARLISA VINCIGUERRA
    




		
	 	
    

	 	
    Name: Marlisa Vinciguerra
    




			
	 	Title:	
    Attorney-in-Fact
    






		
	 	
    THE PENNSYLVANIA STATE UNIVERSITY
    






			
	 	By: 	
    /s/ DAVID E. BRANIGAN
    




		
	 	
    

	 	
    Name:        David
    E. Branigan
    



			
	 	Title:	
    Executive Director
    




12